Conditions for Assignments or transmissions of trademark in India

Clauses 38 and 39 lay down the provisions and conditions regarding assignability and transmissibility of registered trademark or unregistered trademark along with the goodwill of business subject to provisions contained therein. Subject to those provisions, this clause lays down the restriction on assignment or transmission as to prevent splitting of rights of a trademark on a territorial basis and creating rights on different persons in different parts of India. However, the Registrar has been conferred the power to approve such assignment or transmission if he is satisfied that it would not be contrary to public interest. This clause is the same as section 40 of the existing Act with necessary amendment only regarding services.

Comments

conditions

The law in this respect in effect is the same as was contained in section 40 of the 1958 Act. The section lays down the restriction on assignment or transmission so as to prevent spitting of rights of a trademark on a territorial basis and creating rights on different persons in different parts of India. The object of the provision is clearly to prevent confusion and deception in the minds of the public as to the trade source of the goods or service. At the same time, to prevent hardship to the commercial commodity, the law empowers the Registrar to approve such assignment or transmission, if he is satisfied that it would not be contrary to public interest.

Law applicable to registered and unregistered trademarks

The provisions of the section are applicable to both registered and unregistered trademarks, as well as transmissions, as is evident from the provision to the section, which uses the expression ‘on application in the prescribed manner by the proprietor of a trademark’, as distinct from the expression “proprietor of a registered trademark”. An application may thus be made on Form TM-P even by a proprietor of an unregistered trademark, seeking the approval of a proposed assignment.

Registrar’s approval of a proposed assignment

Provision to section 41 permits a person to obtain Registrar’s certificate or prior approval of the assignment or transmission and for this purpose any person may make an application on Form TM-P of trademark Registration together with a statement of case setting out the circumstances and a copy of any instrument or proposed instrument effecting the assignment or transmission. The Registrar may call for any evidence or further information that may be necessary. The statement of case may also require being amended id required to include all the relevant circumstances and, if necessary be verified by an affidavit. After hearing the applicant and any other person, whom the Registrar may consider to be interested in the transfer, the Registrar may consider the matter and issue in writing notification of approval or disapproval to the applicant and such other person accordingly.

Exercise of right would not be contrary to public interest

Whether the proposed assignment or transmission would not be contrary to the public interest is to be considered from a broader perspective, though essentially the question is whether in the circumstances of the case, the deception or confusion or confusion is likely to arise as a result of such assignment or transmission. The question will have to be approached from a practical point of view, having regard to the nature of goods and the business. By empowering the Registrar to approve cases where he is satisfied that in the circumstances of such case, the use of the trademark would not be contrary to the public interest, the law clearly envisages a discriminatory approach between business extending throughout the country and local trade without altogether prohibiting the assignment of trademark resulting in concurrent rights being vested in different proprietors in different places in India. Such discrimination is apparently justified where the trade in relation to which the mark is used is local in character, e.g., vegetables, ice cream, bread or similar perishable articles. Indeed in the case of trademark KWALITY for ice cream, the Registrar applied similar considerations and allowed assignment of the trademark, under the corresponding provisions of the old Act.

On the other hand, where the business in the goods or service is such which extends to the whole or a large part of the country, such as cigarettes, textiles, pharmaceuticals, wine etc., it is possible that the use of the same mark by different proprietors with exclusive rights on each of them in different parts with different conditions, will be likely to cause confusion and deception and the law does not permit such assignment.

Distinction between powers under sections 40(2) and provision to section 41

Powers of Registrar to issue certificates of validity under section 40(2) are limited to assignment of registered trademarks. However, the scope of provision to section 41 is wider and covers the conditions of assignment of registered and unregistered trademarks and also transmissions. Section 41 contains an absolute prohibition unless covered by the exception contained in the provision so that an assignment of unregistered trademark which is contrary to section 42 is bad in law. However, the question of validity of the unregistered trademark which is under section 40(2) may be considered by the Court in the context of proceedings of conditions  under section 134(1)(c). The provision to section 41 covers a transmission which is already effected, and also a proposed assignment. While a proposed assignment can be subject to scrutiny in terms of the provision, a transmission by operation of law does not contemplate any such scrutiny.

Notes on Clauses

This clause seeks to stipulate conditions for assignment of a trademark without goodwill of business. Such an assignment will not take effect unless the assignor obtains directions of the Registrar and advertises the assignment as per the registrar’s directions and as per the procedure to be prescribed. The purpose of advertisement is to give notice of the assignment without goodwill of the business to the public. This clause explicitly states that the assignment of a trademark in respect of only some of the goods or services with the goodwill of the business pertaining to those goods or services, or the assignment of the trademark which is to be used only in relation to goods or services for export together with the goodwill of the export business only is not to be deemed as an assignment without goodwill of the whole business and in such cases, it would not be mandatory to obtain directors of the Registrar. This clause follows the existing provisions in section 41 of the Trade and Merchandise marks Act, 1958, which consequential changes relating to conditions of goods or services.

Object of advertisement

It is to be noted that the present Trade Marks Act, 1994 in the United Kingdom has abolished this requirement as being of little practical effect as the safeguard to the public. Further, the government found the requirement to be a burden to the trademarks owners and the Registry. In Indian trademarks Act, 1999, however relating to the old law governing advertisement of assignment, in section 42.

Assignment in the following conditions not deemed to be without goodwill

An explanation to section 42 enacts that an assignment of the following description shall not be deemed to be an assignment made without the goodwill of the business in which the mark is used, namely:

  • An assignment in respect only of some goods or services for which the trademark is registered, accompanied by the transfer of the goodwill of the business concerned in those goods or services only; or
  • An assignment of a mark which is used in relation to goods exported from India or in relation to services for use outside India, if the assignment is accompanied by the transfer of goodwill of the export business only.

When a trademark is registered for a variety of goods or services section 38 permits assignment in respect either all the goods or services or some only of those goods or services. The law also permits assignment of trademark with or without goodwill of the business. Where a trademark has been used by the proprietor in relation to more than one item of goods or services he might transfer the trademark together with the goodwill of the business concerned only in those goods or services. In such cases, though there has not been transfer of the entirety of goodwill of the business in all the goods or services, there has been a transfer of goodwill. Similarly, where the proprietor of the trademark is using the mark in relation to goods or services within India as well as in the export market, it is possible for him to assign the mark along with the goodwill of the export business only.

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